LVCVA OKs suit against Venetian

Wednesday, Dec. 15, 1999 | 10:44 a.m.

Hornbuckle nominated

Tuesday's meeting was the last for LVCVA board member Juanita Wilson, who submitted a letter of resignation.

Bill Hornbuckle, president and chief operating officer of the MGM Grand hotel-casino, was nominated to serve the remainder of Wilson's term, which runs through June.

Wilson said while she respected Hornbuckle's reputation in the gaming industry, she was disappointed that the board did not nominate a nongaming hotel representative. Wilson is owner of the EconoLodge Downtown Motel in downtown Las Vegas.

In other business, the board approved a $92,500 expense to open an office in Seoul, South Korea. The nation is the No. 9 international market for Las Vegas. The LVCVA already has overseas offices in Germany, Great Britain and Japan.

The Las Vegas Convention and Visitors Authority board of directors gave its legal counsel permission to sue the Venetian hotel-casino and others that have tried to block an expansion project this year.

Board members, who Tuesday voted unanimously to authorize filing the suits, considered this the best way to recover taxpayer money that has been lost as a result of what they call a frivolous lawsuit.

A lawyer for the Venetian, meanwhile, portrayed it as a chilling attack on the resort management's First Amendment right to free speech as well as an swipe at the resort's attempts to seek legal redress on controversial LVCVA decisions.

Venetian attorney Stephen Peek also assured board members that a suit by the LVCVA against the resort would guarantee further delays for any expansion.

LVCVA officials said it was the first time the agency had contemplated a suit against a local resort property for anything more serious than an unpaid bill.

It was also unusual for the board to take such an action in an open meeting. Usually, litigious matters are considered in closed sessions so that a confidential attorney-client relationship can be maintained.

But LVCVA legal counsel Luke Puschnig told board members he wanted to bring the request in an open meeting to show that the agency is prepared to fight back against suits designed to disrupt the agency's business relationships.

He also said it seemed to be the best way to recover millions of dollars that have been lost as a result of delays in a project the LVCVA tried to get off the ground last spring.

After publicly criticizing the LVCVA in April for its plan to have major show customers finance an expansion in exchange for advanced rent payments, the Venetian said the LVCVA was not prepared for the project and had no long-term plan or traffic study in place.

The LVCVA then abandoned that plan and lobbied for state legislation that would allow it to use revenue bonds to finance the 1.3 million-square-foot expansion.

When the agency took that course to build the $150 million expansion, the Venetian sued, saying the LVCVA actually was using a form of general obligation bond, not a revenue bond, to build the project because funds were backed by county sources and not just convention revenues. The general obligation bond, the Venetian argued, required a public vote.

The Venetian said the expansion would unfairly compete with its privately owned Sands Expo Center.

Because of the uncertainty the lawsuit presented and the emergence of federal legislation challenging the LVCVA's tax-exempt status, the bond sale was canceled. Meanwhile, the Venetian began signing convention customers put on hold by the delay to contracts with the Venetian and the Sands Expo Center.

Although the District Court judge assigned to the case put it on an accelerated schedule, it wasn't until October that the LVCVA prevailed in the Venetian suit.

In November, the LVCVA determined that it could save money on its bond sale with a negotiated sale instead of a competitive bid. The Venetian challenged that action in court, but the same District Court judge that ruled against the resort in October threw it out.

The Venetian is now considering refiling that challenge as well as filing an appeal on the October decision.

In Tuesday's meeting, the board was asked to confirm its November action on the negotiated sale of the bonds. The move raised more eyebrows at the Venetian, while LVCVA executives said it was a move out of an abundance of caution.

The board approved the action unanimously -- and, in the process, put the spotlight back on how much more the expansion project is going to cost taxpayers.

In showing how the negotiated sale of bonds would save the LVCVA an average of about $362,000 a year in debt service payments over the cost of bonds from competitive bids, financial experts compared the two scenarios to the original July bond sale.

The negotiated bond sale scenario is still an average $754,000 a year more than the annual costs of the bonds in July. The reason: The interest rate has gone up more than 0.5 points since July.

Over the 20-year life of the bonds, consultants say taxpayers would pay more than $10 million for debt service than they would have if the sale had occurred in July under the original plan.

Puschnig said the Venetian and others in cooperation with the resort could be sued for that amount and other price increases and costs that have resulted from the delays. Among them: an increase in the price of steel that raised the price of the building; increases in labor costs over the previous year; lost revenues in room and entertainment taxes and loss of business that could be directly attributed to the delay.

LVCVA officials have not finished calculating the total cost of the project delay.

Puschnig said his staff could also pursue punitive damages against the Venetian.

The board concurred that it stood to gain more pursuing the countersuit than it would pay in legal fees to pursue damages.

When board members began asking specific questions about legal strategies, LVCVA President Manny Cortez interjected that details would be forthcoming to the board -- in a closed session.

Peek asked rhetorically if board members Mary Kincaid and Lance Malone -- both members of the Clark County Commission -- would next seek suits against Wal-Mart or American Medical Response because they sued the county over board decisions that affected their businesses.

Peek also promised to protect his client's First Amendment right to speak freely.

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